The following selected account balances were taken from the financial statements of Blumberg Inc. concerning its long-term
Question:
At December 31, 2017, the following information is available:
1. Blumberg purchased additional common shares in Black Inc. on January 2, 2017, for $65,000. As a result of this purchase, Blumberg's ownership interest in Black increased to 40%.
2. Black reported income of $33,000 for the year ended December 31, 2017. 3. Black declared and paid total dividends of $14,000 on its common shares for the year ended December 31, 2017.
Instructions
(a) Prepare a reconciliation of the Investment in Black Inc. account from December 31, 2016 to December 31, 2017, assuming Blumberg Inc. uses the equity method for this investment.
(b) Prepare a table that contrasts the direct and indirect methods for presenting all transactions related to the Black Inc. investment on Blumberg's statement of cash flows based on the assumption that Black uses IFRS and adopts the policy of classifying dividends received as investing activities. Be specific about the classification in the state- ment for each item that is reported.
(c) Prepare a table that contrasts the direct and indirect methods for presenting all transactions related to the Black Inc. investment on Blumberg's statement of cash flows based on the assumption that Black uses ASPE and must therefore classify dividends received as operating cash flows.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy